Jay Chaudhry’s Risk-Taking Journey in CybersecurityJay Chaudhry’s Risk-Taking Journey in Cybersecurity Jay Chaudhry, the billionaire founder of Zscaler, shares his unconventional path to entrepreneurship. Growing up in rural India, he had no aspirations for running a business. However, the dot-com boom in Silicon Valley inspired him to take risks and invest his savings into SecureIT, a cybersecurity startup. Despite lacking experience, his intuition and belief in the potential of internet security led him to quit his stable job and start his entrepreneurial journey. The initial investment of $500,000 proved fruitful as SecureIT quickly gained traction and was eventually acquired for nearly $70 million. Over the next decade, Chaudhry and his wife founded and sold several more companies, building a solid financial foundation. In 2007, he established Zscaler with an investment of $50 million. Today, the company generates significant revenue and holds a market cap of $30 billion. Chaudhry emphasizes the importance of following one’s gut feeling, even when it involves substantial risk. The confidence in his abilities and the simplicity of their lifestyle allowed him to make peace with the potential loss. He advises aspiring entrepreneurs to thoroughly research their ideas, invest their own money, and be committed to their decisions. By taking risks and believing in himself, Jay Chaudhry has created a lasting legacy in the cybersecurity industry.
Jay Chaudhry never thought he would run a business, make a fortune or helping popularize an entire industry. Not growing up in rural India, not when I moved to the US in 1980 to study engineering and marketing, not even after landing jobs at tech giants like IBM and Unisys.
“I don’t have a background in entrepreneurship in my family of small-scale farmers. So if you were to ask me, ‘Did I ever think about being an entrepreneur when I was a kid (or) the early years of my career?’ Not really,” Chaudhry, the billionaire founder and CEO of cloud security company Zscaler, tells CNBC Make It.
It was the dot-com boom in Silicon Valley — the wild success stories of tech startups like Netscape — that got Chaudhry thinking in 1996: “Why not start my own company?” He made the hasty decision to quit his executive job at Atlanta-based tech company IQ Software, and his wife, Jyoti, quit her job as a systems analyst at telecommunications giant BellSouth.
Together, they invested their savings — about $500,000 — into SecureIT, a cybersecurity software startup they co-founded in 1997. At the time, “maybe less than 5% of the Fortune 500 had firewalls,” Chaudhry says. “Within 18 months, we had firewalls deployed in about 50% of[the]Fortune 500.”
His timing was perfect: In 1998, Chaudhry sold SecureIT to VeriSign in an all-stock deal valued at nearly $70 million. Over the next decade, the couple founded two more cybersecurity companies and an e-commerce business, each of which was acquired.
By 2007, they were already wealthy entrepreneurs and Chaudhry, who “gets bored” when he has nothing to work on, decided it was time to “create one big company and focus on that 200%,” he says.
That company was Zscaler, which wanted to help companies transition from legacy firewalls to the cloud era. The pair invested $50 million of their own money, Chaudhry says. Today, it generates $1.6 billion in annual revenue and has a market cap of about $30 billion.
Forbes estimates Chaudhry’s net worth at $11.5 billion.
Here, Chaudhry talks about how he risked his family’s savings to follow his intuition, how his upbringing influenced his relationship with money, and what advice he would give to someone looking to quit their job to start their own business.
CNBC Make It: What prompted you to invest all your savings into a startup idea? in a sector that didn’t really exist yet?
Chaudhry: This happened because I love reading and technology.
In 1996, Netscape had just launched and gone public, and I was fascinated by it. I said, “If (Netscape co-founder) Marc Andreessen could start a company — he was a young guy (just) out of college — why shouldn’t I start a company?”
My wife and I have talked about it a few times, and the more we thought about it, the more we became convinced: (Netscape’s Web browser) is the way to access information, and it should be popular. But if every business is connected to the Internet, that means there are going to be security risks.
That was my simple thought. There was no IDC or Gartner study on the size of the market. It was largely based on what our gut feeling told us.
A gut feeling is one thing. Putting every dollar on the line is another.
It started with us saying, “Let’s go raise venture capital funding.” I had no experience raising funds, and I quickly realized it wasn’t that easy. This was (1996), Atlanta wasn’t a VC mecca, and we kept hearing, “Hey, you don’t have experience.”
We were disappointed, but our confidence grew and I said, “Why don’t we just risk our savings?”
I didn’t know anything. So I really didn’t know how big the risk was. I couldn’t quantify it.
How did you make peace with that risk?
After talking about it for a while, we asked each other, “What’s the worst that could happen?” The business could close and we would lose all of our savings.
The next question was, “Can we find work?” There was a lot of confidence that we could do this.
I never had any money growing up, so there was never any idea that I had to buy A, B, and C. Our lifestyle was pretty simple. Our house in Alpharetta, Georgia, cost $200,000 — a nice, typical middle-class home at the time — and we didn’t have fancy cars or fancy payments.
Our only child at the time was going to public school. There wasn’t a lot of overhead. We said, “Let’s take a chance.”
If a bet pays off, does that success give you more confidence to take bigger risks? Were other ventures you’ve made as risky as the first one?
The (financial) risk of SecureIT was, like, 1,000 times greater than the risk of Zscaler. The amount I invested in Zscaler was a small fraction of my net worth.
But Zscaler was much harder. I put more money into it than I did into all the others combined. I made bigger bets. I hired people faster to solve some really hard problems. I wanted to do something big, something lasting.
We were trying to solve a futuristic problem. Will it be successful or not? Will the market catch on or not? All of that was unknown.
So if you were to ask me the probability of success of Zscaler, there was a much higher risk. Because with SecureIT, it was pretty clear that you need firewalls if you connect to the internet.
What’s your best advice for someone considering quitting their job to start their own business?
First build conviction by learning more about what you want to do. Don’t just do superficial work.
Secondly, start investing your own money. That’s actually part of testing your conviction. If you really have conviction, you’re going to take a chance on yourself. That also means you’ve done some serious homework, you’re ready, you’re committed.
You can also make decisions the way you want to make decisions. If Zscaler was majority owned by VCs, they probably could have shut it down. It took a couple of years to really get traction in the market, and VCs can write you off and move on. They say, “This is one of my 20 investments.”
If you put your own money into it, this is your only business.
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